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BrightSource’s cancelled projects highlight hurdles for desert solar thermal plants

Katie Fehrenbacher — Thu, 04 Apr 2013 20:12:02 +0000

Solar thermal company BrightSource has seen two of its contracts — to sell power from its desert solar farms to utilities — cancelled since the beginning of 2013. The situation highlights the hurdles that such large solar thermal power plants face, while rooftop solar panels continue to drop in price and are increasingly being installed.

Solar thermal technology uses mirrors to concentrated the sun’s rays to a liquid-filled collector point, which heats up and produces steam and powers a steam tubine, delivering electricity. Solar panels, on the other hand, convert sunlight directly into electricity.

This week utility PG&E and BrightSource agreed to mutually terminate agreements for PG&E to buy solar power from two 250 MW planned solar power plants, called Hidden Hills, located in Inyo County, near the Nevada border. The projects are estimated to cost a combined $2.6 billion, and the companies said the contract was terminated due to “challenges associated with the project schedule and uncertainty around the timing of transmission upgrades.”

BrightSource has been focused on adding energy storage technology to its projects, which would make its power plants more robust and be able to provide energy when the sun isn’t shining. BrightSource says its Hidden Hills site is a good candidate for a solar farm with the storage technology, but that such a change would require an amendment to the permit application and a reopening of the record to go over the new layout and plan. Suspending the current application saves time and expense, BrightSource spokesperson Keely Wachs tells me.

Back in January utility Southern California Edison and BrightSource also agreed to terminate a contract for a 200 MW solar plant for its Rio Mesa 2 project near Blythe, California. The California Public Utilities Commission had denied an adjacent contract next to Rio Mesa 2 due to cost concerns last year, and BrightSource suspended permitting for both Rio Mesa 1 and 2 earlier this year.

There’s three transmission lines at Ivanpah

BrightSource is completing its flagship solar thermal project called Ivanpah in the desert near Las Vegas this year. Wachs says that BrightSource is also currently focused on its Palen solar project in Riverside County, which has already been permitted by the California Energy Commission.

But still, the hurdles for BrightSource’s solar power plant contracts illustrate some of the inherent difficulties with trying to build massive solar plants, filled with mirrors and trackers and towers. Such large solar farms need transmission lines to shuttle the power to the cities that will use it, but transmission lines can be controversial, expensive and take a very long time to deploy.

Environmental reports can also take many months and a lot of money. Protests from environmentalists have derailed, and added significant costs, to solar thermal projects.

While solar thermal projects face such hurdles, solar panels continue to drop in price and are being deployed at a rapid pace. As GigaOM Pro research analyst explained this week: “3313 megawatts came online in the U.S. in 2012, a 76 percent increase over 2011 with GTM Research predicting that we’ll see continued growth up to 4300 megawatts this year.” And in particular utility-scale solar panel projects grew 134 percent last year and accounted for more than half of installed solar.

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VantagePoint curbs cleantech fund raising due to lack of interest

Katie Fehrenbacher — Tue, 05 Feb 2013 17:27:03 +0000

Venture capital firm VantagePoint Capital Partners, which made one of the most aggressive bets on backing cleantech startups, has stopped raising a planned $1.25 billion fund to put into cleantech companies due to lack of support from limited partners (the pensions and big investors that put money into venture capital funds), according to a report from Dow Jones VentureWire. VantagePoint started raising that fund (VantagePoint CleanTech Partners III) in late 2010.

It’s no surprise that LPs are growing cold on the sector. I discussed this with a panel of investors late last year at the VERGE conference. Salzman tells VentureWire that the reality from the LP community was: “show us the money.” Other firms that have pulled back (slightly or a lot) or changed their strategy to focus on green IT include Mohr Davidow, NEA, Draper Fisher Jurvetson, and Kleiner Perkins.

VantagePoint had a few wins, but it also has had many losses. On one hand VantagePoint backed Tesla and Solazyme, which both went public. But the company also backed firms like MiaSole, Serious Energy, Tendril, and Better Place, which have struggled. Bright Source was planning on going public but pulled the IPO in the 11th hour.

Salzman embodied the aggressive all-in approach of cleantech investing. He told me in an interview in late 2011 that “when it comes to greentech investing, it’s basically all or nothing.” And instead of becoming more cautious when the market cooled following the 2008 recession, Salzman and VantagePoint seemed to double down.

VentureWire asked Salzman whether focusing VantagePoint on cleantech was a mistake, and Mr. Salzman told them: “I wouldn’t admit it if it was.”

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The fourth quarter of 2012 in cleantech

Mon, 14 Jan 2013 08:12:23 +0000

The fourth quarter in cleantech saw attention paid to two prominent and publicly traded companies: EV maker Tesla and newly minted public listing SolarCity. It remains a transitional period for the sector as investment declines and investors look for value investments and give money to those companies able to scale with little additional capital.

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Why 2012 hasn’t been such a bad year for cleantech

Maud Texier — Tue, 18 Dec 2012 08:00:26 +0000

As 2012 is coming to an end, SolarCity’s suspenseful IPO could be the final bright spot of a troubled year. Yes, as has been noted many times over the past few months, we are in Gartner’s trough of disillusionment, but the plateau of productivity might not be so far away.

The downside

So where do we stand now? First of all, the solar market has been deeply affected by the dramatic cost reduction of solar panels due to Chinese manufacturers. While China and the US are disputing trade tariffs, solar modules continue to fall in price, creating a lot of victims among US module manufacturers or emerging startups working on cheaper cells.

Wind Production Tax Credits are also expiring at the end of the month, which will likely dramatically impact the wind market. Last time the PTCs were allowed to expire, at the end of 2003, installations dropped 77 percent the following year. Power Purchase Agreements for wind projects have also never been so low: from $72/MWh in 2009 they decreased to $35/MWh by 2011. The equation might be hard to solve in 2013 for the wind industry.

IPO attempts in the cleantech sector have not been so successful either. Several companies ditched their IPO plans in 2012, such as solar thermal company Brightsource, waste fuel company Enerkem and electric vehicle company Smith Electric. In addition to SolarCity, Enphase is one of the only companies that made out this year. VCs are now stepping out of the industry as some have put heavy investments into development and manufacturing and have seen few returns.

The upside

However, this year could just be a step that eventually delivers market maturation rather than a “crisis”. Low cost Chinese manufacturers actually enabled a dramatic increase in solar panel installations, particularly in the U.S. With a more than 100 percent year-over-year increase in mid-2012, the US market has been booming this year and grid parity is on good track.

The focus has now shifted beyond module manufacturing and to new financing mechanisms such as leasing or crowd-funding. The objective is to make solar projects more accessible by avoiding high upfront costs and enabling the mass-market to participate in this effort.

Venture-capitalists are also not totally out of the game yet. The energy market is a tough one to penetrate with high upfront investments and 20-30 years payback as you build a new power plant – a far cry from the quick returns of IT/Internet companies. That is why VCs shifted their attention to what they know best: software.

Call it Green IT, Cleanweb or Cleantech 2.0, these are the application of web business models to cleantech. Focused on software or apps, these products do not need high capex and can generate some revenues fairly quickly. Some people are skeptical about if the cleanweb can be as disruptive as next-gen energy technologies like new solar cells. Nonetheless IT will be a useful tool that will support and promote the cleantech market, and act as a catalyst for breakthrough technologies. In fact, these apps and software could be the trigger to bring renewable energy or electric cars to the mass market.

Ultimately, policies are still decisive for our industry. Obama‘s re-election creates hope regarding the PTCs’ extension. A few game-changers were also introduced this year: the Green Button initiative announced in 2011 really materialized this year through utilities’ adoption and the Apps for Energy challenge. It opened up a new market in terms of energy services and will help entrepreneurs to develop their products without entirely depending on utilities to reach end-customers. More recently, California’s Cap and Trade market finally put a price on CO2 emissions. This will enhance energy efficient systems and promote low-emissions technologies.

In a few words, a lot of money has been spent over the last years within the cleantech industry. 2012 has actually been the witness of a market concentration, where we had to start rationalizing the expenses in order to build a sustainable system. With most of the technologies now in place, we need to modulate and bundle them, so they meet the market’s expectations. Inevitably, cost structures and customer adoption will be decisive for the cleantech to really and sustainably take off.

As an engineer Maud Texier dedicated her efforts towards the energy market. She hails from the oil & gas industry, and started her career working in electricity markets. As an analyst on a power trading desk, she studied the market mechanisms that can develop new demand-response models. Maud is now scouting new technologies such as renewables, storage or energy efficiency, for a large power utility, and analyzing the main trends of this growing market.

Images courtesy of SolarCity, flickr user Tapestry Dude.

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Cleantech and investment in 2013

Mon, 17 Dec 2012 17:05:16 +0000

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SolarCity IPO still moving, now plans to sell more shares at $8 per share

Katie Fehrenbacher — Wed, 12 Dec 2012 13:41:34 +0000

Solar panel installer and financier SolarCity might have slipped past its goal to price its shares on Tuesday, but in a new filing, the company says it is now planning to sell more shares and is asking for $8 per share, significantly lower than its initial range of $13 to $15 per share.

SolarCity says it plans to sell 11.5 million shares, and 65,000 of those shares will be sold by existing stockholders. Originally SolarCity was planning on selling 10.1 million shares.

Co-founder, and Tesla CEO, Elon Musk still says in the filing he plans to buy $15 million worth of shares. In addition, SolarCity says investor Draper Fisher Jurvetson plans to buy 1.5 million shares in the offering, and the DBL Equity Fund (DBL is an investor) plans to buy 300,000 shares in the offering.

At $8 per share, SolarCity would raise $92 million, less than its original plan to raise $141 million (at the previous midpoint of its range). At $8 per share SolarCity would also be valued at $585 million, points out Reuters, a little more than half of its original $1 billion valuation.

Wall Street still seems skittish around solar stocks, despite that SolarCity is quite different from a solar manufacturer like Solyndra or First Solar, as well as a solar plant developer like BrightSource. SolarCity finances and installs solar panels on rooftops, so it’s been able to take advantage of the super cheap solar panels in the market.

However, SolarCity is facing headwinds in a few areas: it needs to maintain its access to low cost capital to fund its solar roofs, it has rising losses along with its rising revenues, and it has a few unusual things in its filing (see number 3 in 5 things to know about SolarCity’s IPO, and it’s not all good.) SolarCity is seen as a bellwether for clean energy exits and stocks.

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SolarCity sets terms for an up to $151 million IPO

Katie Fehrenbacher — Tue, 27 Nov 2012 15:59:59 +0000

Solar installer and financier SolarCity has set the terms of its planned IPO, and says in a filing on Tuesday that it intends to sell 10,065,012 shares at between $13 and $15 per share. At the midpoint of that range SolarCity would raise $141 million, and would have a market value of $1.2 billion. At the high range, SolarCity would raise $151 million.

According to a Reuters report last week, SolarCity plans to go public before the end of 2012. When the company filed its S-1 back in April — which became public last month — it said it could raise up to $201 million. Based in San Mateo, south of San Francisco, and founded in 2006, SolarCity wants to be listed on the NASDAQ under the symbol “SCTY.”

If SolarCity has a successful IPO it could be an important bellweather for venture-backed solar and next generation energy technology exits. There have been very few in 2012 — for example, solar project developer BrightSource ditched its planned IPO because it wasn’t getting the valuation it wanted. But SolarCity has been able to benefit from the drop in cost of solar panels.

SolarCity recorded $59.55 million in revenue and $73.71 million in net losses in 2011, compared with $32.43 million in revenue and $47.07 million in net losses in 2010. For the first six months of this year, the company posted $71.42 million in revenue and $48.91 million in net losses.

SolarCity raised $200 million in venture funding, and its investors include Draper Fisher Jurvetson, DBL Investors, Generation Investment Management and Tesla Motors’ CEO Elon Musk. This would be the second large IPO for Musk’s investments, following Tesla.

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BrightSource actually raising $130M for solar thermal

Katie Fehrenbacher — Fri, 09 Nov 2012 17:27:18 +0000

Last month solar thermal startup BrightSource announced it had raised a massive $80 million in equity. But in addition to that $80 million, the company is also looking to close on another $50 million according to a filing, which would bring this latest round to $130 million. That’s huge and would bring BrightSource’s total funding raised to date to $665 million.

As I previously pointed out, it’s pretty rare these days that a cleantech startup can close on such a large round — investors are far less willing to put big rounds into cleantech startups in 2012 (see GigaOM Pro’s Q3 wrap up). But some cleantech startup outliers — able to raise sizable rounds — are still out there.

Watch this video for free on GigaOM

BrightSource develops solar thermal plants and its design uses fields of large mirrors to concentrate sun light onto the top of large towers. The tower has a boiler at the top that heats liquid, which in turn runs steam turbines and produces electricity. BrightSource is building a solar farm called Ivanpah near Las Vegas on 3,600 acres, and currently has 2,100 workers installing about one mirror a minute onto poles in the desert ground.

BrightSource’s investors include power company Alstom and venture firm VantagePoint Capital Partners, and additional investors included DFJ, CalSTRS, DBL Investors, Goldman Sachs, Chevron Technology Ventures and BP Ventures.

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To get the green light, solar farms factor in price, storage and land

Ucilia Wang — Thu, 25 Oct 2012 20:40:14 +0000

Should Californians pay more for renewable electricity in hopes that the state will gradually move away from relying on fossil fuel-based power plants? If so, how much more? That’s a tough issue to consider, and it formed the basis of a decision by the state regulators on Thursday to approve two contracts for solar farms that they say should help reduce the costs of producing solar energy in the future.

The California Public Utilities Commission voted 5-0 to approve two power purchase agreements between developer BrightSource Energy and Southern California Edison. The contracts will see power flowing from the yet-to-be-built Rio Mesa 1 and Sonoran West. At the same time, the commission rejected Edison’s request to approve three other contracts with BrightSource.

Edison actually sought approval for all five contracts, totaling 1,000 MW, back in 2009, when energy storage played no part. Then it re-negotiated the contracts with BrightSource in 2011 after BrightSource had modified those power plant proposals to reduce their environmental impact. This time around, energy storage made its way into three of the contracts.

The decision was a compromise. The commissioners were set to vote on the five contracts back in August, but postponed it because they were wrestling with which of the five they should approve. The commission’s own staff recommended approving contracts for three projects that would include storage and denying two projects that wouldn’t have storage. With energy storage, a utility could bank electricity when demand is low and release the power when demand is high. It makes a solar power plant act more like a conventional fossil fuel power plant, which can produce power any time of the day.

So while using storage will add cost and increase the price of a contract, its benefits outweigh the expenses, the commissioners said, particularly since California requires its utilities to increase the amount of renewable electricity in their supplies until it reaches 33 percent by 2020. Under law, utilities need to provide power reliably to their customers regardless of the sources of their electricity.

But commissioners didn’t see their vote for the five contracts as quite so black and white. One issue was the contract pricing and the other one was a more philosophical deliberation about how to chart a path to cleaner and more affordable energy by 2020. Commission President Michael Peevey came up with a compromise plan and won the support of the four other commissioners.

The contracts for Rio Mesa 1 and Rio Mesa 2, totaling 400 MW, are way pricier than bids submitted to Edison while it was renegotiating with BrightSource, the commission noted in its proposed decision. But the commissioners didn’t want to say no to both contracts because BrightSource plans to use newer technology that it says will use land more efficiently and therefore reduce its projects’ environmental impact. The commissioners wanted to give BrightSource a chance to use the new technology, so during its Thursday vote, it approved the contract for Rio Mesa 2 but said no to Rio Mesa 1.

The commissioners also said no to two of the three projects, Siberia 1 and Siberia 2, that contain energy storage because those two are proposed for a location that would likely require an upgrade of the transmission lines there in order to deliver power from the two solar farms. That upgrade would be so expensive as to “render the projects infeasible,” the commission said. The remaining project with storage, Sonoran West, is priced competitively against competing bids, so the commission voted for it.

Allowing BrightSource to use the new technology and storage is important for the state to get cleaner and cheaper power in the future, the commissioners said. Commissioner Mike Florio, who usually cites high prices as the chief reason for voting against certain contracts – he cast the lone “no” vote for the solar power contract between Abengoa and Pacific Gas & Electric last year – said he supported Peevey’s compromise because it promises a clear progression toward lower-cost solar power.

“Here the path is directly visible.” Florio said during deliberation Thursday. “I normally don’t support ratepayers having to pay for technological risks, but we will have to take some risks like these.”

Winning those contracts is crucial for BrightSource to raise money for building those plants. Investors will more likely put up money if they know BrightSource already has found buyers for its projects. Incidentally, the company announced yesterday that it had raised an equity round of $80 million. The company is building its first solar power plant called Ivanpah, in California.

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BrightSource raises a whopping $80M for solar farms

Katie Fehrenbacher — Thu, 25 Oct 2012 15:16:54 +0000

After ditching its IPO plans in April, solar thermal startup BrightSource announced on Wednesday that it’s raised another $80 million in equity, bringing its total funding raised to $615 million. It’s pretty rare these days that a cleantech startup can close on such a large round — investors are far less willing to put large rounds into cleantech startups in 2012 (see GigaOM Pro’s Q3 wrap up).

But BrightSource has managed to scale up, its first inaugural solar thermal farm Ivanpah is getting close to completion, and it’s got a pipeline of projects waiting to be developed. Lead investors in the round included power company Alstom and venture firm VantagePoint Capital Partners, and additional investors included DFJ, CalSTRS, DBL Investors, Goldman Sachs, Chevron Technology Ventures and BP Ventures.

The boiler on the tower at Ivanpah

Alstom is a massive power company, and BrightSource says through the investment, the two will work on developing solar thermal projects in India and Australia, in addition to their planned partnerships in Africa. VantagePoint is a longtime cleantech investment firm led by Alan Salzman — Salzman said at an event earlier this year: “Embracing incumbents and finding the enlightened ones is essential (for startups) to scale.”

BrightSource develops solar thermal plants and its design uses fields of large mirrors to concentrate sun light onto a large tower. The tower has a boiler at the top which heats liquid, which in term runs steam turbines and produces electricity. The Ivanpah solar farm near Las Vegas is being built on 3,600 acres, and has 2,100 workers that install about one mirror a minute onto poles in the desert ground.

Here’s a video I took when I toured Ivanpah a few months ago:

Watch this video for free on GigaOM

When BrightSource decided to stop pursuing its IPO plans earlier this year, CEO John Woolard told me that because of the weak public markets, particularly for solar and greentech companies, BrightSource’s potential IPO transaction wasn’t necessarily at the terms that the company and its investors wanted. So, likely, raising more private equity enabled BrightSource to maintain a valuation that its investors and management more closely agreed with.

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